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this instance, the court was led to believe that no payments had been made, when in fact the debtors
had been submitting payments that did not include disputed forced-place insurance fees.
Furthermore, the court noted that there was no literal truth to the statement that the debtors lacked
equity in the residence and counsel conceded that the statement was part of a form pleading, as they
had no particularized knowledge of debtors' equity or lack thereof.

II. Reliance Solely on Information Provided by the Client is Insufficient.

Good faith alone is not enough to comply with Rule 9011. Indeed, “Rule 9011 imposes an
affirmative obligation upon counsel to conduct a reasonable inquiry into both the law and the facts
before advancing a particular position to the court.” In re CMGT, Inc., 458 B.R. 473, 485 (Bankr. N.D.
Ill. 2011). As the Seventh Circuit has observed, “an ‘empty head but a pure heart is no defense."
Chambers v. American Trans Air, Inc., 17 F.3d 998, 1006 (7th Cir. 1994). While it is usually
reasonable for a lawyer to rely on information provided by a client, an attorney must make a
reasonable effort to determine what facts are likely to be relevant to a particular court filing
and to seek those facts from the client. In this case the court found that counsel relied solely on
an automated system which permitted the client to narrowly define the information available to
counsel.

The inadequacy of the automated system should have been readily
apparent, according to the court, as it failed to disclose any information
concerning equity in the home, the flood insurance dispute and the payments
that had been made. Furthermore, the court stated that once the debtors
responded to the motion, any reasonable attorney would have sought
clarification and further documentation from the client, in order to correct any
prior inadvertent misstatements and to avoid further errors. In re Taylor, 655
F.3d 274, 284-85 (3d Cir. 2011). The overreliance of the firm upon the automated system resulted in
sanctions, despite the fact that “Rule 11 sanctions are . . . to be granted sparingly” and “should not be
imposed lightly”. Lefkovitz v. Wagner, 219 F.R.D. 592, 592-93 (N.D. Ill. 2004), aff'd, 395 F.3d 773
(7th Cir. 2005).

III. When a Misstatement is Discovered, Counsel Should Swiftly Remedy Same.

In deciding to sanction counsel in Taylor, the court noted that counsel had attempted to prosecute
its motion even after learning of its misstatements. This resulted in a failure to comply with the
“safe harbor” requirement under Rule 9011(c)(1)(A). That provision gives the offending party the
opportunity, within 21 days after service of a motion for sanctions, to withdraw or correct the offending
pleading in order to avoid imposition of sanctions. Divane v. Krull Elec. Co., 200 F.3d 1020, 1025–26
(7th Cir. 1999). The provision “serves the laudable purpose of requiring litigants to dispose of
frivolous claims without judicial involvement.” In re Dental Profile, Inc., 446 B.R. 885, 899 (Bankr.
N.D. Ill. 2011). As a result, in the event that one inadvertently fails to conduct a reasonable
inquiry and makes a misleading statement to the court, sanctions may be avoided if measures
are taken to swiftly correct the offending conduct. Such a remedial course of action likely could
have prevented the sanctions ultimately awarded by the court in Taylor.
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